Canadian Oil & Gas Industry: 2015 Fiscal and Economic Priorities Presentation to the Canadian Petroleum Tax Society October 30, 2014 Ben Brunnen 1
Overview About Canada s Oil & gas industry Trends Confronting Oil & Gas Indusrty Price and Market Outlook Costs Pressures Emerging trends CAPP 2015 Fiscal and Economic Priorities 2
About Canada s Oil and Natural Gas Industry CAPP members represent approximately 90 per cent of Canada s natural gas and crude oil production Industry estimated investment in 2013 was $74 billion Largest single private sector investor in Canada Nearly 50% of Alberta s economic activity is attributable to oil and gas industry Payments to governments average about $18 billion per year Industry employs more than 550,000 in Canada (direct & indirect) 3
Oil Prices 140.00 120.00 100.00 US$/bbl 80.00 60.00 40.00 Brent Spot WTI NYMEX Cdn Lt Swt WCS 20.00 - WTI Premium to WCS 4
Canadian Production - Oil Sands (Bitumen & SCO) & Conventional
Canadian Pipeline Capacity vs 2014 Supply Forecast
Canadian Fuel Oil and Crude Oil Moved by Rail: Car Loadings & Tonnage Source: Statistics Canada 7
Global Natural Gas Prices $US/MMbtu 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Japan North America Sep-13 Jan-14 Europe May-14 Source: World Bank North America Europe Japan
New Market Opportunities for W. Canadian Gas Area of Oil Sands Deposit NGTL Westcoa st PNG (Capacity approx: 110 MMcfd) Pacific Trail: Proposed (Kitimat LNG) Coastal GasLink: Proposed (LNG Canada) Prince Rupert Gas Trans: Proposed (Pacific Northwest LNG) Growing Oil Sands Demand Westcoast Connector: Proposed (Prince Rupert LNG) Potential LNG Export Demand Declining Traditional Market Demand 9
Canadian Production Market Constrained Case and New Market Opportunity Case Market Constrained Case Eastern Canada CBM New Market Opportunity Case Western Canada Unconventional Western Canada Conventional 10
11 Conventional Operating Costs vs. Revenues
Canadian Tight Oil Production by Play Source: NEB Tight Oil Developments in the Western Canada Sedimentary Basin, Dec 2011
Real Average Weekly Earnings, Mining & Oil & Gas Extraction 2000 1800 1600 1400 1200 1000 800 Jan-01 Jun-01 Nov-01 Apr-02 Sep-02 Feb-03 Jul-03 Dec-03 May-04 Oct-04 Mar-05 Aug-05 Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 May-09 Oct-09 Mar-10 Aug-10 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Alberta Ontario BC 13
Summary of Emerging Issues and Trends Confronting the Industry Project 3-5-10 Findings Record industry investment significant proportion from debt financing Constrained market access Continued pressure on WCSB prices and margins (extraction costs and labour) Evolving industry structure (more capital requirements, more automation) Increased regulatory complexity Convergence of big data and public expectations Growing environmental expectations and public participation Increased requirements for Aboriginal engagement Challenged political environment 14
Fiscal and Economic Priorities 1. Renew CAPP Competitiveness Framework i. Strengthened approach to incorporating emerging issue and trend insights into priority setting 2. Competitive Fiscal Environment i. LNG fiscal and tax competitiveness ii. An effective revenue transparency framework iii. Reframe the subsidies discussion iv. SR&ED reforms v. Competitive Royalty Policy 15
Fiscal and Economic Priorities 3. Municipal Competitiveness i. Alberta Municipal Government Act review ii. Saskatchewan competitiveness iii. BC Industrial competitiveness (LNG) 4. Workforce i. Strengthened access to labour ii. iii. i. Prioritize Canadians First labour market program reforms ii. Temporary Foreign Workers used for construction, maintenance and turnaround for on and offshore facilities Improve data quality and availability Partnerships with post-secondary institutes 16
CAPP Fiscal and Economic Policy Approach Tax Committee Sales and Indirect Tax Committee Production Accounting Committee Workforce Advisory Group Fiscal and Economic Executive Policy Group Royalty Policy Committee Property Tax Committee Policy Development and Advocacy 17
Discussion